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Category: October 2016

October 2016 Net Worth Update(+$1,333, 0.9%)

Background

Here is our October 2016 Net Worth Update. I started documenting our net worth in June 2016 (June 2016 Net Worth Report) and the amount came out $127,575. We saw our Net Worth rise to $145,094 in October (an increase of $1,333). This is some continued progress which we are excited about and will keep us on track to meeting our Five Year Net Worth Projection. We use these projections to provide targets/goals and keep ourselves motivated toward reaching financial independence. Lets get into the details starting with how I track the family’s net worth.

Methods

I utilize two methods for tracking my net worth. The first method is by using Personal Capital. This software is an incredible, free financial tool that combines all of your accounts in one place. Personal Capital provides insight into your cash flow, investment portfolio, and other methods to grow your net worth. Use the affiliate links above if you interested in Personal Capital and like the content on this blog. I know it has helped me get a better handle on my finances and grow my net worth.

The second method is through a custom Excel spreadsheet that I have created and modified over the years. It is nothing special and I have to update it manually which I enjoy doing. Now onto the nuts and bolts of my net worth.

October 2016 Net Worth Overview

Following the October 2016 Net Worth Overview table there is a breakdown of the individual categories of our net worth. October was a below average month and our net worth was somewhat stagnant when compared to recent months. The biggest gains came from our debt payments (both standard minimums and extra principle payments on my wife’s student loan debt). Our retirement accounts saw some pullback related to weak market performance. This is one of those months where there isn’t a ton of excitement from an overall perspective, but it is nice to see our net worth grow even in light of poor market performance. See below for more details on each of the categories.

Emergency Fund

We have focused on setting aside $100 per month to keep building up this fund. This month we were able to put away roughly $270. We currently have $14,700 in our emergency fund. We are getting 0.55% on the money held in this account. Combine the contribution and minor interest payment and the account grew by $278 this month. We plan on capping our emergency fund at $15,000 and diverting the monthly contributions elsewhere.

Checking Account

The checking account typically hovers around $5,000, but has peaks and valleys each month depending on when we have our direct deposits and various withdrawals hit the account. We earn no interest on this account. This month we were in one of those valleys. I am chalking this up to the monthly variation in timing of our direct deposits.

Home

This month the home value remained unchanged at $225,000. The gain came from making our standard monthly payment which reduces the principal of the loan by $791. We likely won’t live in this home long enough to pay off the balance and with the interest rate being so low I am not focused on aggressively paying it off. Current pay off date – November 2030.

We purchased our home in Summer 2012 for $186,000. Based on comparable sales and an appraisal when we refinanced, I am estimating the market value of our home at $225,000. The home loan is a 15 year fixed term loan at 3.25%.

My Retirement Plan

401k – Retirement Account

In October I continued my usual contributions to my 401k plan. I still contribute enough to get the full employer match. I still lost some value here given the small day-over-day losses to end October. We almost managed to break even when factoring in the contributions.

Pension Plan #1

I have been waiting for this to hit for the past few months and it finally did. As I previously described, my current employer offers a pension plan where the employer annually contributes a small percentage of my salary into a fund. The employer funds this percentage quarterly.For example, say the employer contributes 3% which is equal to $1,000. The employer will contribute $250 every three months into the account for a total of $1,000 on the year.

Roth IRA – Retirement Account

This Roth account is held through a robo-advisor account. I was contributing $100 per month to this account. I didn’t like the balance between my pre-tax (401k and 403b) accounts and my Roth account and wanted to see more tax diversification in my retirement accounts. I am stopping this contribution for the time being as I want to start building up additional cash reserves to increase our financial flexibility.

Wife’s Retirement Plan

403(b) – Retirement Account

Similar to the 401k, my wife’s retirement plan saw some pullback this month. Her contributions are smaller than what goes into the 401k so the affect is felt more in this account. Not worried about this since retirement investing isn’t a straight-line growth.

Pension #2

My wife’s employer offers a pension plan where the employer annually contributes a percentage of her salary into a fund. The employer funds this 2.5% annually. For example, say the 2.5% equals $1,000. The employer will contribute $1,000 at the end of the calendar year. The plan also provides a very low return that is similar to the rates you would receive in a money market or savings account, approximately 0.5% annually. This return is credited to your account on a monthly basis which comes out to 0.125% per quarter. This month we saw the small, monthly return that we expected.

Car #1

We own my vehicle outright so there is no monthly payment. A few months ago, I valued the vehicle on Kelly Blue Book (KBB) at $12,000. I have been assuming the value of the car decreases by approximately 1% per month (or 12% per year). The value of the car is now $10,740.

Car #2

For Car #2 we have a 60 month auto loan for $18,774 at 2.8%. We continued to make progress on the car loan this month. This car saw the expected depreciation. I have been assuming the value of the car decreases by approximately 1% per month (or 12% per year).

Student Loan #1

This student loan is from my time in business school. I refinanced this loan at 3% and plan to pay it off over the course of the next five years. I was fortunate enough to have my undergraduate education paid for by my parents so there is no loan balance from that time.

Student Loan #2

We are almost at the end of this debt pay down journey. We put $814 toward this student loan and only have $1,290 to go. This has been our primary area of focus for going on 12 months now and it great to almost be done. We are close to freeing up the $280 in cash flow associated with these student loans. The goal is still to pay off this debt in December 2016. Unless something unexpected pops up, this should not be an issue.

Credit Card

My wife and I use one credit card to handle the majority of our purchases. It provides 1% cash-back on everything and 5% on certain, rotating categories.

We roughly charge $2,500 per month on this credit card. We pay the balance in full every month. There is always some carry over month to month but we are never charged any interest.

Please comment below with your thoughts on our financial situation and the progress we have made with our net worth in our October 2016 update.